Bermuda-based Endurance Specialty Holdings Ltd. is one of the few reinsurers that appears to be swimming against the tide of red ink. The company reported net income of $26.8 million or 40 cents per diluted share for the third quarter of 2004, compared to net income of $56.5 million or 83 cents per diluted share in the third quarter of 2003.
Operating income, which excludes after-tax realized investment gains and losses and foreign exchange gains and losses, for the quarter was $23.7 million or 36 cents per diluted share versus $55.2 million or 81 cents per diluted share in the third quarter of 2003.
For the nine months ended September 30, 2004, Endurance posted net income of $242.5 million or $3.58 per diluted share versus net income of $174.5 million or $2.68 per diluted share for the first half of 2003. Operating income for the first nine months of 2004 was $240.0 million or $3.54 per diluted share, up 43.1 percent from the first nine months of 2003.
“Annualized operating return on average equity during the third quarter of 2004 was 5.4 percent and annualized operating return on average equity for the nine months ended September 30, 2004 was 18.7 percent,” said the bulletin.
Chairman and CEO Kenneth J. LeStrange commented, “We are pleased that we have produced a profitable overall result for our shareholders this quarter, despite the magnitude of industry-wide catastrophe losses this hurricane season. Our strategy of portfolio diversification and disciplined risk management proved to be a particularly strong asset for Endurance this quarter. Excluding catastrophe related losses, all segments of our business performed extremely well. Given our strong performance to date, we expect to meet or exceed the upper end of our return on equity guidance for the full year of 2004 of 15.5 to 17.5 percent, assuming normal catastrophic losses in the 4th quarter.”
He also noted: “Endurance continues to focus on identifying and developing strong growth opportunities for our shareholders. In September, we acquired the majority of XL Re’s surety reinsurance business through a renewal rights purchase agreement. In making this acquisition, we gained access to a profitable line of business without being exposed to any historical liability risk.
“In September, we also formed an Agricultural Reinsurance business unit, and we see a significant, attractive opportunity in that segment. Recently, we named Mike Fujii to lead our future insurance efforts in the United States. Each of these growth opportunities is an excellent complement to our overall portfolio and strategy.”
Endurance also reported that “gross premiums written were $367.9 million for the quarter ended September 30, 2004, an increase of 13.2 percent from the $325.1 million in gross premiums written for the third quarter of 2003. For the first nine months of 2004, Endurance had gross premiums written of $1.4 billion, an increase of 7.4 percent from the $1.3 billion of gross premiums written and acquired in the first nine months of 2003. Earned premiums in the quarter were $409.5 million, an increase of 21.9 percent from the third quarter of 2003.
“The combined ratio was 103.0 percent in the third quarter of 2004 compared to 88.5 percent in the third quarter of 2003. The loss ratio was 75.3 percent in the quarter compared to 59.2 percent in the third quarter of 2003. During the third quarter the company incurred losses from Hurricanes Charley, Frances, Ivan and Jeanne, which adversely affected our property catastrophe, property treaty, direct property, and other specialty lines segments. As previously reported, estimated net losses from the four hurricanes is expected to be approximately $115 million. The Company benefited from $50.9 million in positive reserve development for the third quarter of 2004 from prior years, compared to $11.5 million in the third quarter of 2003.
“At September 30, 2004, the Company’s GAAP shareholder’s equity was $1.8 billion or $26.69 per diluted share, up 15.1% from September 30, 2003.
Total assets were $4.9 billion and net cash and invested assets were $3.6 billion, an increase of 47.2% from the third quarter of 2003. Net operating cash flow was $306.7 million in the third quarter of 2004 versus $286.8 million in the third quarter of 2003.”
Further financial detailsmay be obtained on the company’s Web site at: www.endurance.bm.
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